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EU to stress test banking sector

THE European Union will stress test its banking system by September to determine its resilience to the economic downturn and find out if it is adequately capitalized, EU sources and banking supervisors said yesterday.

The stress tests will be done by national supervisors according to common guidelines and methodology of the Committee of European Banking Supervisors.

But it won't single out banks that need more capital or be made public, supervisors said, a step critics say would keep investors in the dark to some extent about potential problems.

A United States stress test of individual banks made public last week was widely seen as helping to give clarity to investors.

"The decision was taken by the EU finance ministers. They decided to ask the Committee of European Banking Supervisors to organize a stress test," one EU source familiar with the ministers' deliberations said.

"But it is not a stress test of individual institutions like the Americans are doing. It is more a highly aggregated stress test, which should show the degree of resilience of the overall EU banking sector," the source said.


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